Argentina faces radical change

Latest leader vows economic overhaul, likely devaluation

BUENOS AIRES — Argentina's fifth president in two weeks took office Wednesday, vowing to largely abandon the nation's free-market policies and to push through a "program of national salvation" that could involve a risky devaluation of Latin America's most stable currency.

Eduardo Duhalde, a former vice president and two-term governor of Buenos Aires province, now faces a daunting task: restoring confidence in his nation, both among a populace frustrated by four years of recession and the international community. Argentina has a $132 billion public debt and is facing its worst crisis since the interruption of democracy by the 1976-83 military dictatorship.

"The financial crisis is without precedent," Duhalde said after his selection by Congress on Tuesday. "We have been left today without a peso."

The expected devaluation of the peso could bankrupt millions of Argentines. For a decade, the peso has been tied 1-1 with the dollar, and about 80 percent of private debt is calculated and payable in dollars. Devaluation would make it far more difficult for people to repay their debts.

The recent events have been crushing for Argentina, a country that has long prided itself on its prosperity and self-image as the most European of South American nations.

During the early 20th Century, Argentina was a magnet for European immigrants, including British industrialists who built much of the country's infrastructure and Italians who fostered a love of opera and the signature Argentine dance, the tango. Because of its historic arts community and bustling cafe society, Buenos Aires has long been called the "Paris of the Pampas."

Despite near-catastrophic hyperinflation of the late 1980s, Argentines clung to the notion that theirs was the most stable economy and society in the region.

But recent protests, looting and rapid changes in the presidency have been more reminiscent of Latin American countries that frequently have struggled with weak currencies and wildly fluctuating economies.

The Council on Hemispheric Affairs, an independent think tank based in Washington, said that the crisis debunks "the myth that Argentina is a fully developed nation and a triumph of the market economy. . . . The international community must make an investment in Argentina."

Little chance of honeymoon

Duhalde faces the same fractious political climate that forced President Fernando de la Rua to resign on Dec. 20, following two days of rioting and looting that killed 27 people.

Since his departure, the presidency has been a revolving door.

Three other men served only a matter of days--or in one case, hours--as Argentines have continued to march in the streets, demanding solutions to the faltering economy. Unemployment has topped 18 percent.

"This is the last opportunity for the traditional political class in Argentina to show they can solve the nation's problems," said Rosendo Fraga, a Buenos Aires political analyst.

Fraga said the days and weeks ahead will be an important test not only for Duhalde, but for Argentina's now-ruling Peronist Party, founded more than a half-century ago as a working-class movement by Argentina's legendary military leader, Juan Peron.

Duhalde, 60, plays up his Peronist image, even eschewing neckties during his unsuccessful presidential bid in 1999.

He has pledged to form a unity government representing many parties that will "abandon" the political bickering of previous administrations.

Unlike the temporary presidents who served in recent weeks, Duhalde has marshaled support not only from his own party but also from the opposition in Congress. Lawmakers overwhelmingly chose him late Tuesday to serve out de la Rua's term, ending in December 2003.

Thousands of people spilled into the streets late Tuesday clanging pots and pans to protest Duhalde's selection and calling for a national election, but by Wednesday the streets appeared calmer.

Economists said Duhalde is gambling that Argentines will support a return to a nationalistic state that will guarantee jobs, unemployment benefits and protection of local industry.

IMF likely to steam

Such a plan likely will require increased public spending at a time when the International Monetary Fund has prescribed tighter budgeting as a prerequisite for receiving aid. Argentina already has suspended payments on its public debt.

Duhalde has said he must abandon Argentina's decade-old policy of pegging the peso to the U.S. dollar, following the devaluation trend of several Latin American neighbors, including Brazil.

Duhalde's advisers, including Jorge Remes Lenicov, who is expected to become economy minister, probably will attempt an orderly devaluation of the peso, but that may be difficult because of a lack of monetary reserves to support the currency.

There is also the vexing problem that most Argentine mortgages and credit card accounts are calculated and are payable in dollars. Some analysts predicted that the government would try to transfer those debts to the devalued peso.